South Sudan: How should Uganda do business this time?

Should the ongoing peace negotiation, currently in high gear, succeed, South Sudan, once Uganda’s biggest export market, would have its door flung opened for business, again.But unless the peace deal is struck and some reasonable stability is restored, the enormously lucrative market will remain a no go investment destination for majority of Ugandan exports.After about just eight years of existing as an independent country, South Sudan, a nation that had just emerged from years of liberation war, plunged into conflict again, due to the power struggle between the two leading principals, President Salva Kiir and his former deputy Riek Machar.

Since then, the ensued conflict has had dire consequences on all fronts, with Uganda’s export trade being one of the most hit, considering that the newest nation in the world then, was the country’s leading export destination.According to Uganda Export Promotion Board and Kampala City Traders Association (KACITA) estimates, opportunity to earn from mainly Uganda’s exports, totalling about Shs3.5 billion every day, has been rendered impossible since December 2013 when the insurgency broke out in Juba, South Sudan capital.

While at it …Lately, there has been some serious development unfolding in the region that if allowed to succeed, could open the door to the South Sudan market again.About a fortnight ago, the UN Security Council imposed an arms embargo on South Sudan and sanctions on some military officials to compound pressure on warring groups to end the ruthless war.About the same time, news emerged from Khartoum government in Sudan that South Sudan’s warring factions have agreed to sign a “preliminary” power-sharing deal as soon as last week. This would then be followed by a permanent deal before the end of the month.

As part of the regional efforts to end the conflict in neighbouring South Sudan, the Khartoum and Kampala government have been instrumental in brokering peace talks between the two rival principals, South Sudanese President Salva Kiir and rebel leader Riek Machar since June.It is reported that the two warring leaders have already agreed on a permanent ceasefire and withdrawing of their forces from urban areas of South Sudan, the world’s youngest country formed in 2011 after it split from Sudan.

They also agreed on a power-sharing deal during a round of talks held in Kampala on July 7 that basically saw Mr Machar restored to his previous position as the number two in government.If this results into the much sought-after peace, then Uganda’s economy should be prepared to collect the low hanging fruits as it did years before South Sudan plunged into political abyss.

Once bitten, twice shyBut the problem is that Uganda bears the brunt of the turmoil.The question now is: How should the South Sudan market be approached without ‘burning fingers’ again? Already, there are more than 70 Ugandan traders who supplied grains and related commodities to South Sudan about a decade ago. Their balance amounting to nearly Shs130 billion hasn’t been paid yet. This situation has been further delayed by the political instability in South Sudan over the last five years or so. Daily Monitor understands that commitments to pay some of these traders are underway. But according to the chairman of Kampala City Traders Association, Mr Everest Kayondo, this commitment by the government only caters for the big suppliers and not the small traders whom he also wants compensated.

A second chance?Importantly, however, there is no doubt that Uganda businesses will again try to capture the South Sudan market as soon as they feel it is safe to transact business there.“It is obvious that our businesses and traders will venture into South Sudan again,” the commissioner external trade at the ministry of trade, Mr Silver Ojakol, said last week when interviewed for this article.He continued: “Our message to all Ugandans doing business in South Sudan is they should ensure that they make their presence known to our embassies there. It is crucial that they register with our embassy in South Sudan so that their existence and purpose there is known. This means in case of anything, they can be accounted for.”

Border marketsGoing forward, he said the plan is to erect border markets in Elegu and Oraba where transaction between the two countries will be mainly happening.”This will reduce the risk exposure that could be encountered in South Sudan, resulting into loss of both precious life and hefty investments.However, this is only a dream which hasn’t come true yet because the government is broke.For the meantime, Mr Ojakol is encouraging the private sector to take lead in development of the border markets, pledging government blessing and collaboration at all levels.

Have records of nationals abroadA veteran economists and former politician, Mr Kanyomozi Yonasani Bankobeza, argues that the first step is to have a record of any trader or exporter or business person that trades in South Sudan with government. Kenya is already ahead in that front, he says.

Part of the road connecting to South Sudan through Oraba border. FILE PHOTO

He was also of the view that as a country: “We should always assume a neutral position because that has an effect on relationship, including business, particularly when the situation stabilises.

Importantly perhaps, it should be made mandatory for Ugandans doing businesses in South Sudan to take insurance against risks, including the ones that occur due to political differences.According to the technical director, Pentad Insurance Services, Mr Solomon Rubondo, government should protect Ugandans engaged in trade and commerce outside the country. That includes taking an insurance cover that could come in handy in case they are exposed to risks and uncertainty.

Cautious approachAmidst all that, Mr Kayondo is urging traders, most of whom are KACITA members, to be cautious. He said unless all is well in South Sudan it could be dangerous to venture there.“We may not have control over individual traders. But do not risk your investment. Currently, there are no guarantees yet that business could be done with minimum or no disruption. So we want our members to exercise caution.”Those who must venture there should do so in piece meal. Once there, they must register with association of Ugandan traders in South Sudan.

Uganda’s trade with South Sudan

Before the neighbouring country plunged into chaos, export earnings rose by 9.6 per cent to $3.93 billion (about Shs14trillion) in the period July 2017 to March 2018 from $ 3.59 billion (about Shs13trillion) a year earlier.This increase was mainly on account of a rise in the export volumes of beans, coffee, tea and maize. According to ministry of trade statistics, Uganda’s exports to South Sudan were valued at $265million (about 990billion) by 2015 (figures for 2016 not yet available). These are mainly cereals, sugar and sugar confectionery and Products of the milling industry; malt; starches and wheat gluten.

South Sudan became Uganda’s leading export destination in 2008 a Comprehensive Peace Agreement (CPA) that was signed in 2005.Just three years later (in 2008), total exports (both formal and informal) peaked at $1.18 billion (nearly Shs4 trillion). About five years later, the gains were quickly eroded as the environment quickly degenerated.

“However, the fighting that broke out in December 2013, sparking off a civil war in South Sudan, caused a steady decrease in Uganda’s exports from $414m (Shs1.3 trillion) in 2013, to $385m (Shs1.2 trillion) in 2014 and $353m (Shs1.1 trillion) in 2015,” according to an earlier statement issued by ministry of trade.Uganda’s leading exports to South Sudan are cereals, milling products (maize flour, wheat flour), sugar, iron and steel, cement, beers and soft drinks, motor vehicle re-exports, vegetable oils and soap lubricants.

CABINET’S BACKING

The vice chairperson, committee on national economy, Parliament of Uganda, Mr Lawrence Bategeka, says it is upon the government to ensure protection of lives, properties and investments of its nationals doing business beyond the national borders. He said: “Business comes with risks. Government should guarantee those risks. But that is rare for our case.”He continued: “But traders, suppliers and investments beyond our national borders must be protected by the government. This is because they contribute towards the wellbeing of the economy of their mother country.”

Safety net for tradersWhich way for traders?

Amidst all that, Mr Kayondo is urging traders, most of whom are KACITA members, to be cautious. He said unless all is well in South Sudan it could be dangerous to venture there. “We may not have control over individual traders. But not risk your investment. At the moment, there are no guarantees yet that business could be done with minimum or no disruption. So we want our members to exercise caution.”Those who must venture there should do so in piece meal. Once there, they must register with association of Ugandan traders in South Sudan.